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NAO criticises disarray in government COVID-19 procurement

Author: ICAEW

Published: 19 Nov 2020

8,600 pandemic-related contracts worth £18bn were entered into in the period up to 31 July 2020, but a lack of transparency in how they were awarded and inadequate documentation on the choice of suppliers and how conflicts of interest were managed, has given rise to serious concerns about how public money has been spent.

The National Audit Office has issued a report on how government departments procured £18bn of goods and services between January and July 2020 in response to the coronavirus pandemic.

Procurement across central and local government is strictly governed to provide assurance and transparency for the public over how their money is being spent. In normal times, procedures require open competition for government contracts with conflicts of interest disclosed and assessed. Many of these controls were bypassed when the pandemic hit the UK so that, for example, urgently needed PPE could be secured at a time of intense competition in disrupted international markets.

8,600 contracts worth £18bn were awarded as part of the government response to the pandemic up to 31 July 2020, of which £14.6bn had been paid at the time of the NAO report. These contracts primarily related to £16.2bn of goods and services procured by the Department of Health & Social Care (DHSC) and related bodies, followed by the Department for Education (£556m) and the Cabinet Office (£279m).

Most of the contracts awarded were new, with a value of £10.5bn awarded directly without any competition. When such contracts are awarded at pace, procurement decisions made must be well documented to avoid future challenge and a lack of trust in those decisions, but the NAO reports that it is unable to give assurance that government has adequately mitigated the increased risks arising from emergency procurement or applied appropriate commercial practices in all cases. This was despite technical guidance issued by the Cabinet Office about extra controls that should be put in place to demonstrate a lack of bias and good use of commercial judgement.

Factors leading to this conclusion include the cross-government procurement team being unable to process contract checks before several contracts were awarded and the lack of comprehensive documentation, which is all the more important where there is no open competition. This meant that the factors requiring emergency procurement, why particular suppliers were chosen, or how any potential conflicts of interest had been identified and managed, were not fully disclosed. Indeed, some contracts were retrospectively awarded after work had already been carried out. 

The NAO also reports that requirements to publish the details of all contract awards have not been adhered to with a backlog still being worked through.

The NAO does acknowledge that departmental procurement teams were operating under significant pressure, with tight timescales and many thousands more contracts to deal with than in normal circumstances – for comparison DHSC procured just 174 contracts worth £1.1bn in the whole of 2019-20 excluding pandemic-related contracts. The priority has been to deliver essential supplies for the pandemic response as opposed to dealing with the paperwork. 

However, in failing to fully resource the procurement process to ensure contract awards are managed and documented effectively, DHSC and other departments have not been able to demonstrate that they have addressed the higher commercial and propriety risks associated with emergency procurement.

The NAO’s recommendations for the Government include making public the details of all the contracts awarded, setting out in greater detail the likely risks arising from such fast procurement(particularly looking at lessons learned from the pandemic) and providing the reasons for decisions made, especially where it may appear that certain suppliers have been treated unfairly or that there may be conflicts of interest. 

Alison Ring, director for public sector at ICAEW, commented: “The Government had to make procurement decisions extremely quickly to procure sufficient supplies of goods and services to combat the unprecedented demands presented by the coronavirus pandemic and it is understandable that following procurement processes and completing the paperwork may have not seemed to be the highest priority in the midst of a crisis. However, as this NAO report demonstrates, not doing so has left the Government open to severe criticism about the value for money it has obtained, the heightened risk of fraud and error, and significant concerns about how potential conflicts of interest have been dealt with.

“It is vitally important that there is a clear view of how and why public money is spent, who it is paid to and the reasons particular suppliers are chosen over others. Without proper transparency over the procurement process trust in those making the decisions will deteriorate.”